This Thursday exactly may be called the day of hearings and their contradictions. Moreover, the information of this kind both supported the US Dollar and caused pressure on it. As a result, the “buck” partially yielded its positions to the European currencies and slightly strengthened to the Yen, which in its turn evidently demonstrated the raise of the willing to risk at the market. Both the announcement of the Chinese authorities, which repulsed the before reported intents to revise and cut down their participation in the Euro zone debt securities, and also the later denied messages about the inefficiency of the M&A deal concerning the Prudential, the British colleague of the AIA Insurance, drove the yesterday session. The yesterday published data on the economy of the USA also never encouraged optimistic tune. The result of the next estimation of the US GDP for the 1st quarter failed to live up promises, because the increase of this indicator turned out to be less essential than predicted before. Despite the expectances of the annual increase from primarily represented 3.2% to 3.4%, the shortage to 3.0% was actually stated. Though the generally positive dynamics denotes the move to the steady recovery, it has reasoned the mood descent still yet. The statistics on the number of the preliminary jobless claims showed the like picture. The claims curtailed in number last week, but not so greatly as expected. The claims’ capacity lessened for 14 thousand only, whereas the last week’s forecasted predicted -16 thousand, and the last week value of the secondary claims was revised upgrading – from 471 to 474 thousand. The manufacturing activity raise of the FRS Kansas-City area of responsibility was also marked with slowdown. The monthly indicator of the industrial activity made up 5 in May compared to 24 in April; however, the annual value was 16 in May against 14 in April. Of course, weaker than expected data disappointed the investors, though, as it seems, the desire of the profit fixation mainly caused the US Dollar’s sales-offs, and that will probably go ahead at the current session as well. As concerning the today news, it’s reasonable to pay attention to the Michigan consumer sentiment index, which will probably be equal to its advance value and amount to 73.3, though the Chicago PMI index is foreseen sagging and may demonstrate 62.2 since after previous 63.8. Finally, the April data on the personal incomes and expenses are going to be published. Following the presumptions, the personal incomes should be increasing for 0.4%, and the expenses – also rising for

   The common European currency gained to both the US Dollar and Yen at the Thursday session. The authorities, who are responsible for the Chinese monetary policy, uttered a declaration refuting the reports about the “Middle Kingdom” intended to revise their assets’ extents in the Euro zone debt securities. It greatly supported the Euro as the Chinese investments are the world’s biggest. As it seems, however, the investors’ willing of the profit fixation had no small share in the Euro’s strengthening. As a result, the common European currency put under its belt about 200 points to the US Dollar. Concerning the controversy to the Yen, the situation was even better as it was +300 points here. The reports about the measures taken by the European governments make an efficient background for the Euro, anyway up to the moment. On Thursday, for example, the Spanish parliament approved another budgeting cut down for 15 Billion of Euro both the current and next years. This country’s government announced that the budgeting shortage measures would allow curtail the budgeting deficit to 9.3% of GDP the current year already and also till 6.5% in 2011 from current 11.2%. There was little EU economic statistics. The German consumer price index (CPI) grew up a little in May. In accordance with the publication, its value increased for 0.1% m/m and 1.2% y/y in May, what exactly coincided to the predictions, but encouraged by all means, as the April CPI value showed monthly tumble for 0.1% and annual advance for 1.0%. Today no economic news from the Euro zone is going to be published. The probability of the common currency’s further advance is high enough due to the current climate. As it seems, however, the proximity of the Sunday vacations will slightly cool the players’ eagerness, so the trading will be carried ranging.

   The British Pound turned out to be mostly influenced with the hearings and contradictions among all other majors, because the report about the probable failure of the Prudential-AIA deal pressed on the Sterling, whereas the refutation of this information and the message that all had remained unchangeable i.e., those intents stayed in force, turned back the purchasers’ activity. However, the Sterling’s positions were also under the influence of the economic data, which were presented far from the most favorable light. The data from the Confederation of the British Industries (CBI) disappointed greatly. The Thursday-represented CBI report stated the decrease of the British retail sales in May till the lowest rate since March 2009. The cold and rainy weather is supposed to be the cause of this result. The British retail sales index shifted into the negative sector in May and fixed -18 against +13 in April. The forecast presumed a little advance of this index, till +14. Nevertheless, the “cable” positively completed the day, as it got back to the US Dollar almost 100 points, which had been lost before. There’s going to be not much news about the British economy. Moreover, the most important information has already been published – the GfK consumer confidence index turned out to be greatly worse in May both than forecasted and had been formerly. It was -18 in fact, since after -16 before, despite the analysts’ expectances resolved to -15. Most unlikely, that will become fundamental of the current session, however, the GB Pound has already sustained from pressure. Most probably, the Sterling will be traded less intensively than at the former session, but at risk to get new local minimums to the US Dollar all the same.

   Thereupon the sideways trading the currency of Japan yielded some part of its positions to the US Dollar and some other majors at the trades on Thursday. The optimistic splash made the Yen less attractive as a currency shelter and so reasoned the intensification of its sales-offs. As usual for the end of month, the significantly large package of information about the economic indicators has been published in Japan today. In accordance with the represented data, the retail sale grew up from 4.7% y/y to 4.9% y/y in April. That’s probably quite logical by reason of further deflation “march over the country”, as the all-country core consumer price index (Core CPI) sank down even more and showed -1.5% y/y in April just after -1.2% y/y previously. The unemployment rate increased in April and rose up from 5.0% to 5.1%, whereas the households’ expenses sank down for 0.7% y/y from 4.4% y/y in the previous month. The English for all that is hardly anything proves optimism mentioned in the statements of the Bank of Japan and the governmental reports. In course of the current session the Yen is going ahead sagging, but it’s hardly caused by the dullness of the economic data. The main factor of influence upon the Yen is still the rate of the inclination to risk, which is too high at the moment, and that exactly presses on the currency of Japan. Meanwhile, if this parameter’s vector reverses downgrading again, the currency of Japan will renew its strengthening.

Analysis prepared by:

Arkady Nagiev
Forex4you analyst